News / Amazon pushes into LTL for small package fulfilment and UPS does a u-turn

© Mariusz Burcz

Amazon ended speculation about a foray into the LTL sector with an offering for inbound shipments headed to its fulfilment centres. UPS, which sold its LTL arm four years ago, has now launched a service targeting the LTL market.

Amazon Freight has made its push into the LTL sector official with an invitation to customers using its fulfilment service for transport of merchandise to the behemoth’s US fulfilment centres.

“We have been listening closely to our customers and understand their desire to have more ways to move their freight,” said Ari Silkey, general manager of Amazon Freight. “With LTL, they are now getting access to Amazon’s trusted infrastructure and cutting-edge technology.”

The announcement described the LTL offering as “a cost-effective way to get your smaller loads to Amazon facilities without sacrificing reliability”.

Clients can access the service on Amazon’s self-service portal for shipments up to 14 days out, and obtain quotes. The portal also includes tracking, billing, invoicing, and online payment features. According to Amazon, the LTL service covers thousands of lanes, using a fleet of over 60,000 trailers.

Amazon added it may expand LTL services beyond legs to its fulfilment centres, and would “continue to evaluate shippers’ needs on the new service”.

The move in the US follows the expansion of Amazon’s UK LTL offering to the German market last year.

Meanwhile, UPS has returned to the LTL sector with the launch of Ground with Freight Pricing, a service that targets commercial customers with less-than-pallet-load shipments over 150lbs, describing it as “ideal for commercial shippers looking for small package reliability”.

UPS claims US-wide coverage as well as “predictable cost savings versus LTL carriers”, and pledged “no additional costs for lift-gate, inside delivery, or pallet weight” – surcharges typically levied by LTL carriers.

“UPS is the only major US small package carrier that offers parcel service at LTL pricing, which is a true differentiator,” claimed chief commercial and strategy officer Matt Guffey.

However, one industry insider commented that the service was not a major novelty, as something similar had already been provided for UPS by TForce, which acquired UPS Freight in 2021.

In tandem with the LTL offering, UPS also officially announced its Ground Saver product, which replaces the SurePost service the integrator had offered in partnership with the US Postal Service, which covered the final mile under the agreement. That ended on 31 December

Ground Saver is a cheaper alternative to UPS’s standard Ground service, with transit times that are 1-2 days longer. It targets direct-to-consumer brands and online retailers.

And more new services are in the pipeline, according to Mr Guffey.

“UPS is on a mission to transform our customer experience by offering an end-to-end portfolio which provides delivery, returns, and pickup services seven days a week,” he declared.

Both FedEx and UPS have reinforced their pursuit of the parcel market and SMB clients in an increasingly competitive landscape. Observers have commented that their cost structure puts the integrators at a competitive disadvantage, vis-à-vis rivals like Shipsi, a delivery technology platform that uses third-party drivers for US-wide coverage. In January, Shipsi announced a “lowest-cost last-mile guarantee”.

Shippers are increasingly sensitive to rising costs. According to the latest TD Cowen/AFS Freight Index, ground delivery costs are expected to climb 2.6% year on year in the second quarter. Prices in the first quarter were above the expectations of analysts at TD Cowen and AFS Freight, who attributed that largely to rate increases and elevated surcharges from FedEx and UPS.

They noted that the large integrators had made upward changes in their surcharges more frequently, often at relatively short notice. According to them, UPS and FedEx ground fuel surcharges jumped 15% and 12% respectively from Q4 24 to Q1 25, even though diesel prices fell 8.4%.

With more alternatives to move their shipments, customers have leaned more heavily on the integrators for discounts. According to the index, the average discount on ground parcel rates rose 1.9% in the first quarter, from the previous three-month period.

The prospect of a possible recession suggests downward pressure on pricing will likely increase, with reduced volumes weighing on network utilisation. To counter this, carriers will have to offer more low-cost services and/or keep discounting to keep customers, unless they manage to make it difficult for clients to switch.

The integrators are “very resourceful in this respect”, noted John Haber, chief strategy officer of Transportation Insight.